Building an investment portfolio requires time, patience and strategy. Success does not come overnight and progress comes in fits and starts as asset prices fluctuate.
Working with a financial advisor can give you support and guidance in determining an executing an appropriate investment strategy. However, some financial advisors may lack honesty, experience or wisdom and may end up doing you a disservice. Knowing how to protect your investments from dishonesty and incompetence can reduce your risk of financial loss.
Find a Capable Advisor
Refrain from hiring the first financial advisor you meet. Shop around. Ask your friends and family who they use and if they would recommend their advisor. A good advisor will help you understand the risks of investing and will spend time assessing your investment objectives and risk tolerance to determine the best way to invest your funds. U.S. News warns against hiring financial advisors who take unnecessary risks.
Look for someone who takes plenty of time to understand your financial situation. They should show interest in your goals and in helping you achieve them. You should also look for someone who can educate you about investment-related decisions so you can feel confident about your portfolio.
Beware of any advisor who is pushing annuities or high fee structured products. Make sure you know the fees you are being charged not just by the advisor and his/her firm, but also by the sponsors of any investment the advisor is pushing. The steady drain of fees over the course of many years can zap your nest egg even more than temporary reversals in the market. Remember that a 1 to 2% fee can eat up a huge percentage of your after-inflation investment gain.
Make sure you communicate regularly with your advisor. Let her or him know if your goals or life situation changes. An advisor from whom you never hear a anything is probably just lazy.